If you think inflation is holding up, buy Freeport-McMoran

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The inflation that is chasing the latest stocks is inflation. It steals headlines and promotes capital flows. Money is fleeing rich growth stocks in favor of areas that have benefited from inflation in the past, such as energy and basic materials. Just this week, copper prices plummeted to a critical level of resilience and increased one of my favorite material stocks – Freeport-McMoran (NYSE:FCX). If you think the topic of inflation is here to stay, FCX shares are a must buy.

Source: 360b / Shutterstock.com

And even if you weren’t aware of all the inflationary pressures affecting the economy and how it plays in favor of the FCX, its price chart is reason enough to get moving and playing.

The long-term trend is some beauty. Not to mention that the garden variety would double or triple the pandemic lows of March 2020. Instead, that stockpile of copper has increased by almost 10x from those lows! Real earnings growth and underlying factors drive the bull market.

FCX stock charts

Freeport-McMoran (FCX) weekly chart with a bull break

Source: TD Ameritrade thinkorswim® platform

Proponents may be holding back due to the meteoric rise and may argue that FCX is too expensive, but picking up peaks is useless. Instead, I suggest that we accept the reality that a trend in motion stays in motion. And here is the reality. Prices topped $ 46 for the first time last May, and have traveled both down and sideways since then. So we are not alone no persecution; we buy a breakthrough from an eight-month base.

An increase in the daily time frame indicates that the upward momentum is increasing. Note how the distance between the rotational peaks increases and the 20-day moving average grows faster than the 50-day one. The copper breakthrough caused a gap on Wednesday, and prices are holding up for Thursday’s early trading. Power is a welcome change from the hectic range that has swept the Freeport rankings over the past year.

We are now testing the May peak close to $ 46. Pushing over it could bring fresh buyers to the yard.

Freeport-McMoran (FCX) daily chart with a bull breakthrough.

Source: TD Ameritrade thinkorswim® platform

The earnings announcement is expected on January 26, but I’m not worried about keeping the event going. In the past, FCX shares have barely moved, according to quarterly reports. It was much more volatile during the events than between them. In addition, the recent strength of copper will cause investors to look past all the wrong steps the report may contain.

Copper and options

Before Wednesday, copper prices were stuck in a multi-month range, about which there was not much to talk about. But yesterday changed the story. The weakness of the dollar helped the metal finally make it through resistance at $ 4.50, paving the way for a return to a 52-week high of close to $ 4.80. The scale exploded along with the price, which added meaning and legitimacy to the move. Indicates that breakthrough has endurance.

I also think it is no coincidence that Chinese stocks and other stocks have also increased in emerging markets.

Copper futures with price break.

Source: TD Ameritrade thinkorswim® platform

FCX is one of my favorite stocks to build options trading for two main reasons as an option trader.

First, it has a low share price. The last year has mostly traded between $ 30 and $ 45, which is cheap enough to make feasible top-selling strategies such as bare stakes and covered calls feasible. The required capital is low enough to generate high returns.

Second, it has expensive options due to its above-average volatility. For example, S&P 500 has an implicit volatility of 17%. The volume of FCX is 46%, which is about three times more. That means some strong pay for option sellers.

High-odds FCX trading

I like almost any bull-prone trading, but if you want a higher error rate in case the stock rises after earnings, then try selling selling prices. Recall that when you sell a put option, you receive payment for a promise to buy the shares at the executive price. If the trip runs out of money, it will run out of value, allowing you to save the original credit you received. But if the sale value has expired in cash, you will be allotted and you will have to buy the shares.

Such an outcome may not be bad if it is a company that you still wanted to acquire.

Trade: Sell February’s $ 38 bare road for 50 cents.

On the day of the announcement, Tyler Craig was in debt to the FCX. The opinions expressed in this article are those of the author and are the subject of InvestorPlace.com Guidelines for publication.

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